Jargon Buster

100% Mortgages
Many lenders will now lend 100% of the value of the property you wish to buy, meaning you don't have to find a deposit. Almost inevitably, they tend to either charge higher interest rates, or large higher lending charges, to reflect the increased risk of lending in this way. Many people still choose to take this type of deal, however, as it enables you to "get on the ladder" without months of saving!

Adverse Credit Mortgages
See Sub-Prime.

Advice & Recommendation
Some brokers give you a number of quotes and ask you to choose your own deal. We think it's better to help you with your choice! You can, of course, choose whichever deal you prefer.

Authorisation
Since 31st October 2005, residential mortgages (not including Buy-To-Let) have been authorised by the Financial Services Authority. We are directly authorised and regulated by them, and our registration number is 303257. You can check on the regulatory status of any mortgage adviser or lender by visiting www.fsa.gov.uk/register.

Base Rate
Every month The Bank Of England reviews its "Base Rate". This is the underlying interest rate for a wide range of borrowing, including mortgages. Generally, if you have a Tracker Rate, a Discount Rate or a Variable Rate, you would expect to see movements up or down reflected in changes in your monthly payments.

Broker Fee
Some advisers charge a "Broker Fee" for their services, which is normally in addition to any commission payment they receive for your mortgage. We've seen them as high as several thousand pounds. We don't really understand why you should have to pay one. We're quite happy to advise you without charging a fee, because we get paid by the lender you go to anyway. If you've got an irresistible urge to give money away, can we suggest a charity instead of a mortgage broker?

Buy To Let Mortgages
These are designed to help you buy property for the rental market. You will need at least a 15% deposit. In practice, because the amount you can borrow is normally based on projected rental income, your deposit may need to be bigger than this. Generally there are at marginally higher rates than ordinary residential mortgages.

Capital & Interest
This is how most people choose to pay their mortgage off. Every month your payment to the lender is made up of some towards interest and some towards reducing your mortgage balance, very much like most other kinds of loan. You should be aware that in the early years you pay more interest than capital, and this means you will not pay off as much as you may expect to in the early years.

Capped Rate
With a capped rate, you get the best of both worlds. There's a predefined "ceiling" rate, which you will never pay more than, but if rates go down, your payments goes down. If this sounds too good to be true, it probably is. In reality, the rates are so much higher than fixed rate, they are rarely worth bothering with. There are very few of these rates on the market, but if there's a good one available when you're looking, we'll tell you!

Cashback
Some mortgages offer a cashback at or around legal completion. Normally these are designed to be enough to help with legal fees etc, but sometimes can be a considerable amount.

Discount Rate
This is a variable rate. You are offered a discount (e.g. 1.5%) from the lender's standard variable rate, for a specified period of time, at which point the discount is removed. Often there are redemption penalties for the same period, but you are normally free to ask for a new deal at the end of the discount or even remortgage. In practice this is very similar to a tracker rate, but there is normally no guarantee that the lender will choose to react to changes in the base rate.

Endowment
This is simply an investment plan which was historically used to pay off interest only mortgages at the end of their term. We are NOT authorised to give investment advice, and therefore cannot help with enquiries on new or existing endowments, pensions, or other investment based policies.

Estate Agents
Don't get us wrong-we love estate agents as much as everyone else, but our clients have had problems in the past with them and particularly their mortgage advisers. Most agents are owned by large national chains. The thing about large national chains is they just love sales targets. The thing about sales targets is that they make people very pushy. Many of these chains have a "panel" of lenders, limiting the choice of lenders available to you. Even if they do claim to be "whole of market", ask them if they are targeted on particular lenders. We could name one (very) large chain of agents where although theoretically they can deal with the whole of the market, their advisers only get paid commission if the mortgages go to one of eight "preferred" lenders.

You should also be wary of them threatening, for example, not to put your offer forward unless you use their advisers. This is quite simply illegal. Threaten them with The Office Of Fair Trading.

We should stress that we know of some agents who have excellent advisers giving excellent advice. It's just a shame that their good name is ruined by others whose practices are at best dubious, and at worst, illegal.

Fees (Mortgage)
Some mortgages have fees attached. Some don't. Sometimes they're high and sometimes not. All in all, they are a major consideration when deciding which deal to pick. Why go for a mortgage £5 per month cheaper, if you have to pay an extra £2000 in fees?

Normally, you have to pay a valuation fee which is nearly always charged upfront on application. In addition to this there is normally another charge, sometimes called an arrangement or booking fee, charged to cover admin. This may be payable upfront, or may be added to the mortgage, depending on the lender. We'll always give you a full quotation itemising all fees and charges, before you apply for any mortgage.

Don't forget you will also need to budget for legal fees separately.

Fixed Rate
Obvious as it sounds, a fixed rate mortgage has a payment which is fixed for a certain period of time before changing back to a different variable rate. Normally at this stage, you are free to arrange a new fixed (or indeed variable) rate elsewhere or with your existing lender. Be careful of rate that look too good to be true, because they've probably got a redemption overhang. What may not be so obvious is the choice of the period your rate is fixed for. The longer you fix it for, the longer you can be sure of your payments, but you will almost always also be tied into your mortgage for this time with a redemption penalty. Generally, you can choose 2,3 or 5 year fixed rate periods, but 10 and 15 years are also becoming more popular. Flexible Mortgages

Many mortgages now offer varying degrees of flexibility. This may range from the facility to pay off a certain extra amount monthly without incurring a redemption penalty, all the way to the ability to make unlimited overpayments and borrow them back again. Offset Mortgages are perhaps the most advanced form of flexible mortgage.

Higher Lending Charge
This is, without doubt, a "nasty", which you should be aware of, particularly if you are hoping to borrow more than 85 or 90% of the value of a property. In a bit of a hangover from the days of negative equity and repossessions of the 1980s, many lenders have decided to insure themselves against the possibility that they have to repossess, and lose money. The big catch is that although the policy is there to cover them, and provides you with no benefit whatsoever, you pay for it. Sometimes you pay for it in a big way. On a £100,000 100% mortgage you could have around £3000 added to your loan. The good news is that not all lenders make these charges, and we often advise people to choose a deal with a higher rate to avoid them.

Income Multiple
Historically lenders would provide "multiples" for example 3.5 x single income or 2.5 x joint to determine how much you could borrow. Whilst some still do apply these in a fairly simplistic way, others have started adopting more sophisticated methods to lend more on cases they perceive to be lower risk. For example, someone who's been in a steady job for 5 years and lived at the same address for 10 years, appearing on the voters roll, and paying their credit cards off in full and on time every month would be considered a "safe" bet, and may be offered a larger than usual amount. As a rule of thumb, it has become increasingly easy in many cases to find 4 x single or 3.5 x joint incomes offered. You must remember that the most important thing is to ensure the mortgage is affordable to you, both now and in the future. You may think you can afford £600 per month, but what if interest rates go up 3% or so, and all of a sudden you're paying £800 or more?

Initial Disclosure Document
All mortgage advisers are legally obliged to present you with one of these documents before offering any advice or arrangement of a mortgage. Look out for broker fees and lender panels which could have a significant impact on the coast and quality of the advice you receive. You can find ours HERE.

Interest Only
Because of the popularity of endowments, interest only mortgages were far more popular in the past than they are now. They are very simple in as far as you literally just pay enough to keep up the interest payments, and you continue to owe the same amount. Although they are still used sometimes in particular circumstances, there is a high risk with a mortgage of this type that you are never able to clear your mortgage.

Legal Fees
Legal Fees are a significant cost of house purchase. Although in themselves, they tend only to be £300 to £400 + VAT, there are various extras called "disbursements" such as local searches, and the total bill from your solicitor could be over £800.

Lender Panel
Many advisers, particularly those based in Estate Agents, are limited to a "panel" of lenders when they are giving advice. You can tell if this is the case by referring to the Initial Disclosure Document you should be presented with when you first speak to them. We cover Whole Of Market.

Mortgage Indemnity Guarantee
See Higher Lending Charge.

Redemption Overhang
Some mortgages have redemption penalties longer than the initial fixed, discount or tracker rate period. This means you are left with the choice of either paying a hefty penalty, or being struck on an uncompetitive variable rate for a period of time.

Redemption Penalty
Most mortgages with an initial offer such as a fixed rate have clauses which mean you must pay a penalty if you wish to pay off all or in some cases, part of the mortgage, within a particular period. This is obviously a major consideration if there is any possibility oyur circumstances or needs may change.

Remortgage
A remortgage is simply taking a new mortgage on an existing property. There is a widely held belief that it is only possible to remortgage if you wish to borrow more money, but this is not the case. The most common reason for our clients remortgaging is simply to get a better rate from a new lender.

Repayment Mortgage
See Capital & Interest

Self Certification
This system is designed for people who find it hard to produce documentation which accurately reflects their income, as long as they have a significant deposit. You do still have to declare an income and income multiples are applied in the usual way, making them ideal, for example for the self-employed, or those with an additional income. Despite what you may have been told, exaggerating income on an application for a mortgage is a serious criminal offence and both applicants and advisers have found themselves in court, charged with fraud. Think very carefully before agreeing to be part of this if another adviser suggests it.

Sub-Prime
These are mortgages designed for people with a history of credit problems, with slightly increased interest rates. We do not specialise in this area.

Term (Of Mortgage)
Traditionally, it has been normal for people to take mortgages over 25 years, but recent increases in house prices have led some people to consider longer terms. Most lenders would consider any term between 10 and 35 years, depending on your age. Unless you can prove private or company pension provision, we would not normally arrange mortgage to end beyond age 65.

Tracker Rate
This type of variable rate guarantees that your mortgage will stay within a certain amount (e.g. 0.25% above) of the base rate either for a certain period of time, or even for the life of the mortgage. Sometimes these deals have redemption penalties.

Valuation
All lenders will wish to perform a valuation of the property you are buying to ensure it provides good security for the mortgage. The basic mortgage valuation report is designed entirely for their use, and in many case, although you have normally paid for it, you will not see a copy. Even if you do, you should not rely on its contents because it is very superficial, and you have no recourse against the valuers, should a major fault be found which was not spotted during the valuation.

Most lenders offer the option of a "Homebuyer's Report". This is a rather more in depth report of normally around 8 pages, and will look for common and more obvious problems such as damp or subsidence. It is done at the same time as the mortgage valuation for a slightly higher cost.

Some buyers choose to have a full structural survey done, and this is normally in addition to the lender's valuation. Although these can be expensive, particularly in older properties, they often prove worthwhile!

(Standard) Variable Rate
After your initial offer period (fixed rate, discount etc), your mortgage will revert to the lender's Standard Variable Rate, which is often around 2% above base rate and normally represents pretty poor value for money. Depressingly, figures seem to suggest 60% of all borrowers pay this rate without reviewing their options, and in nearly every case, this means they are paying much more than they need to. It is normally possible to get a better deal from your existing lender, or just remortgage.

Whole Of Market
We are "Whole Of Market" brokers, which means that we will deal with any lender who will deal with us. As of 01/02/05, there were 106 lenders we could deal with, including the vast majority of the household names.

We like to be as straightforward as possible, and as such, we feel you should know there are some lenders (although they make up a tiny proportion of the market) who will not deal with us, or any other intermediary.

We promise that we are not subject to any contract or target of any description to place any amount of business with any particular lender. Naturally there are certain lenders who receive a significant percentage of our recommendations, but this is purely related to the quality of their products.

YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
The Macclesfield Mortgage Company Ltd is an appointed representative of Lifetime Insurance Mortgage Experts Ltd, which is authorised and regulated by the Financial Services Authority. Lifetime Insurance Mortgage Experts Ltd is entered on the FSA register (www.fsa.gov.uk/register) under reference 311266.